(The following is being syndicated from The Captain’s Blog).
After being backed into a corner by Commissioner Bud Selig, Los Angeles Dodgers’ owner Frank McCourt lashed out at Major League Baseball by filing for Chapter 11 Bankruptcy. That’s what rats do.
McCourt and Selig have seldom seen eye-to-eye of late.
According to a press release released by the Dodgers, McCourt justified his decision by claiming that Selig’s refusal to approve a tentative media rights deal with FOX Sports was detrimental to the team. “I simply cannot allow the Commissioner to knowingly and intentionally be in a position to expose the Dodgers to financial risk any longer,” McCourt stated. If anything, the reckless owner has proven more than capable of doing that all on his own.
Needless to say, no one around baseball is laughing at the irony expressed by McCourt, but, the bankruptcy filing could turn out to be a blessing in disguise. Although the filing’s motivation was likely to stave off an attempt by Selig to officially seize the team, it could eventually leave McCourt without an ally in the process. According to the Los Angeles Times, FOX has hinted that it would not be willing to have its proposed contract with the Dodgers consummated by a court ruling. If true, McCourt could find himself trying to scurry off his own sinking ship. That’s also what rats do.
Although the MLB bylaws seem to give the commissioner power over rouge owners like McCourt, it’s almost a given that enforcement would only come after a long and expensive legal battle. For that reason, baseball would be better off if the bankruptcy court is the entity that requires a sale. Even though that would give Selig and company less control over the next Dodgers’ owner, it would save them from costly litigation, further embarrassment, and the continued destruction of a flagship franchise. In the meantime, the bankruptcy filing does provide the Dodgers with enough liquidity to meet its short-term obligations, including payment of all salaries and benefits as well as funding of day-to-day operations.
As mentioned, the wild card in this latest soap opera is FOX, another irony considering many in Los Angeles believe the Dodgers began losing a grip on the city when it owned the team. To many, FOX and Frank McCourt are almost interchangeable, which is one reason the rumored media rights deal has been met with so much suspicion.
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Many believe the Dodgers’ decline began when ownership of the team passed from Peter O’Malley’s family to Rupert Murdoch’s media empire.
Considering how closely the Dodgers and FOX Sports have been aligned in the past, it’s easy to see why one might think they are working in concert. However, the company actually has two dogs in the fight. Not only is FOX one of baseball’s national broadcast partners, but several of its regional networks do business with other franchises. In other words, FOX might have more of an incentive to stand on the sidelines, rather than thumb its nose at the rest of the baseball. Perhaps that’s a trump card Selig has been holding all along?
There is another third party that could also hold sway in the matter: the fans. Attendance at Dodger Stadium is already down a whopping 19% year-over-year, or 8,653 fans per game, and, the longer this situation drags out, the lower those figures could continue to fall. Although an empty Dodger Stadium would be a temporary embarrassment to baseball, it could be another short-term pain that brings about a remedy to the franchise’s current ills. If the fans continue to vote with their feet, it might make McCourt finally take notice of the decline his fiscal mismanagement has wrought.
Frank McCourt has been no stranger to litigation over the last couple of years, so it’s very likely that he has deluded himself into believing he is the victim. Unfortunately for Los Angeles, and all of baseball, the Dodgers’ proud tradition is truly paying the price. Bankruptcy always sounds like a nuclear option, but both the Texas Rangers and Chicago Cubs recently used the vehicle to effect a more stable ownership structure, so hopefully the same outcome will result for the Dodgers.
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5 Responses to Fans, FOX Could Tilt the Balance in McCourt’s Battle with Baseball
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TIQ IQ
“Even though that would give Selig and company less control over the next Dodgers’ owner…”
Doubtful. If we look back one calendar year to the sale of the Texas Rangers and their experience through the bankruptcy process we see that Nolan Ryan (MLB HQ’s preferred owner) was able to end up with the team despite reports that his ownership group did not offer the highest bid.
We know full well that Bud Selig will not permit a bankruptcy judge to meddle in his private fiefdom of cronyism. And while my cynicism is somewhat hyperbolic, I don’t think I’m that far off either.
If Selig is still able to assert his will over the bankruptcy court, God bless him, but if this comes down to an auction, MLB won’t have total say over the winning bid. The Texas situation worked out in favor of MLB, but that doesn’t mean it will in this case. Nonetheless, your point is well taken.
First, we don’t have all the details of why one offer is accepted and another rejected, so your claim of ‘cronyism’ isn’t supported by your example.
Next, highest bid isn’t always the most preferable. If one group is overextending themselves with debt, or doesn’t have the capital to hold up under a downturn in business, then that’s a bid the Selig would turn down over another (albeit lower) with a more financially stable balance sheet. Don’t forget that when teams run into trouble, baseball extends them up to 75 million in credit. You don’t want to go throwing that around for a marginal increase in franchise value. McCourt himself is the best example of why you want to avoid an under capitalized owner. He bought the Dodgers without deep pockets, and he’s been a disaster for the sport.
I agree that the highest bid isn’t always the most preferable for the reasons you cite (capitalization, stability of ownership).
However, you’re somewhat missing the point. The door to MLB ownership doesn’t just swing open for the most well-capitalized owner. As your last sentence clearly shows — and was fairly well-publicized at the time — Selig accepted McCourt into the ownership circle despite the fact that it was well-known that McCourt was highly leveraged and risked losing the team in the future.
Selig has a clear interest in getting a stable owner for the Dodgers but he also has shown a willingness to take in owners that he has a personal preference for. It’s the only reason why Mark Cuban hasn’t been allowed anywhere near the sale of the Nationals, Cubs or Rangers and why I don’t see him coming away with the Dodgers either.
Notice where McCourt chose to file. As someone in this field I can tell you first hand that Delaware is a friendly bankruptcy court for Debtors (at least at the beginning of the case). There is no way that the Judge will not approve the Debtor-In-Possession Loan (DIP Loan) today and allow McCourt to continue to operate the team. If (and it is a big if) he can convince FOX to stay with its TV deal there is a fairly decent chance he can get the bankruptcy court to approve it over MLB’s objection. The wild card in all of this is the players association and it will be interesting to see where they come out in all of this. If McCourt can’t get a TV deal through we likely will be looking at another bankruptcy auction for a MLB team. But for the time being McCourt has maintained control (and leverage) by filing for bankruptcy, something he would have lost if he couldn’t meet 6/30 payroll.